By Michael B. Cohen
Vice President of Global Operations
America’s oldest bank and one of the world’s first custodian banks has embraced the newest trend in finance – crypto assets. With approval from the New York State Department of Financial Services, Bank of New York Mellon will begin receiving bitcoin and Ethereum from select clients, as reported by The Wall Street Journal.
Two Different Worlds of Finance Meet
Bank of New York Mellon and cryptocurrencies seem like an odd pairing. BNY Mellon was founded by the first Secretary of the Treasury, Alexander Hamilton, in 1784. The first digital currency, bitcoin, hit the scene in 2009.
As one of the world’s first custodian banks — meaning that it holds clients’ funds for safekeeping — BNY Mellon is the epitome of security, even if that means keeping assets one remove from clients for maximum safety.
Cryptocurrencies, however, represent autonomy and risk. Those who are fans of digital assets want to make transactions and trade unfettered by government regulations and traditional banking. They also want direct control of their funds.
These extremes are meeting in the middle with BNY Mellon’s adoption of cutting-edge financial products. The bank will hold codes and keys on behalf of customers and will allow client access through highly secure platforms. Fire blocks-software will track transactions and store assets.
BNY Mellon Welcomes Financial Innovation
This announcement wasn’t entirely unexpected. Bank of New York Mellon has expressed interest in crypto assets for the past couple of years and indicated in 2021 that this move was imminent.
BNY Mellon made several intermediate steps, including backing Fireblocks’ crypto trading platform First Digital and partnering with Grayscale to transform the Bitcoin Trust product into an ETF, or an exchange-traded fund.
Despite the staggering losses in the “crypto winter,” in which cryptocurrencies lost $2 trillion in value — the same amount of total assets BNY Mellon manages — financial institutions have not shied away from digital currencies, but have acknowledged that, despite volatility, crypto assets are here to stay.
Bank of New York Mellon is yet another mainstream financial institution to adopt cryptocurrencies. The fact that BNY Mellon is a custodian bank can enhance client security, which can be a concern with digital securities. Although volatility hasn’t been taken off the table, it’s clear that even the most traditional financial institutions are opening their doors to bitcoin and Ethereum.
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